Hackensack University Health, Meridian move closer to a merger

Hackensack (N.J.) University Health Network and Meridian Health entered a definitive agreement to create New Jersey's largest health system.

The deal, first announced in October, has yet to receive approval from federal and state regulators. That is expected to take place within the next year. If approved, New Jersey would join a growing list of states—including Illinois, Michigan and Texas—to see a wave of hospital consolidation and the growth of regional healthcare giants.

The proposed merger would combine HUHN's $1.6 billion budget with the $1.5 billion operations of Meridian Health, based in Neptune, N.J. The newly created system would operate nine acute-care hospitals and employ 25,000 workers. The system could add another two hospitals, should Meridian close its deal for Raritan Bay Medical Center, which has two New Jersey campuses in Perth Amboy and Old Bridge.

The new system would be jointly led by Robert Garrett, president and CEO of HUHN, and John Lloyd, president and CEO of Meridian. Lloyd will step down after 2½ years. The new system will also be jointly governed by each merger partner, with an equal number of board seats for each.

The new system would be named Hackensack Meridian Health and will seek to expand and potentially diversify services, according to officials.

"This period of due diligence has affirmed that our combined organizations will expand access to services and further develop a vast array of new-hospital services to much broader geography,” Joseph Simunovich, chairman of the HUHN trustees, said in a news release. As the deal was announced last year, Garrett told Modern Healthcare that new insurance deals may also be in the works.

Industry mergers have accelerated as companies react to policies under the Affordable Care Act that squeeze public financing for hospitals, create new markets for health insurance and introduce new financial incentives for tighter coordination among hospitals, doctors and other providers.

Executives behind recent hospital mergers contend growth is necessary to weather the risks of new business models. But regulators fear that larger systems will carry too much leverage to raise prices.